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By John Ballantyne

Universal child care — a goal supported by both the Albanese Labor government and the Coalition opposition — is a denial of parental choice. It amounts to heavy government subsidisation of parents whose children are in institutionalised daycare, and is paid to the service-provider, not to the parents.

A parent who leaves the paid workforce to raise children at home is not entitled to this level of government largesse, but must depend for any assistance on means-tested Family Tax Benefit A.

This perpetuates the continuing inequitable treatment of single-income two-parent families with dependent children.

For the past 17 years, both Labor and Coalition governments have slashed tax relief and benefits to single-breadwinner two-parent households with dependent children, but have increased childcare funding for couples enjoying two full-time incomes.

Households in which one of the spouses leaves paid work in order to raise children suffer two penalties. First, the couple sacrifice a second income at the very time they have an extra mouth — or mouths — to feed. Secondly, they find themselves in an inferior tax position. A couple on two full-time incomes don’t pay tax until their combined pay exceeds $36,400, whereas a couple relying on a single income start paying tax once that income exceeds $18,200.

Long ago, the Howard Coalition government sought to compensate single-income, two-parent households by providing them with family tax benefits and the baby bonus.

However, under the Rudd and Gillard Labor governments, the baby bonus was axed. The Abbott Coalition government, in its 2015 Budget, greatly reduced the Family Tax Benefit Part B in order to increase government funding for institutionalised childcare. (David Crowe, “Families lost $9.4bn in benefit cuts to pay for childcare changes”, The Australian, May 9, 2015).

In 2016, after Malcolm Turnbull became Liberal prime minister, the then Treasurer Scott Morrison, in his Budget for that year, committed the government to continue this inequitable arrangement. He pledged to resume increasing childcare subsidies in the following year. How did he propose to finance this largesse? Apparently, by using money from the Coalition government’s cuts to parenting payments and family tax benefits. (Natasha Bita, “Budget 2016: Promise childcare subsidy stays on ice until next year”, The Australian, May 4, 2016).

The reduction to family benefits for parents relying on a single income, and the simultaneous increased in childcare subsidies to households with two full-time incomes, are highly inequitable measures. They impose a harsh financial penalty on struggling parents who prefer to raise their own children rather than hand them over to the care of paid strangers.

For the past 17 years, both Labor and the Coalition have overwhelmingly favoured, and heavily subsidised, institutionalised childcare at the expense of home-based parental childcare.

However, it is parents — not politicians, public servants or the Productivity Commission — who should be allowed to decide how they wish to raise their children.

To achieve a more equitable policy that would offer families genuine choice regarding child-rearing, the following changes need to be put in place and strictly adhered to:

1) Personal taxation should be redesigned to ensure that a couple struggling to raise a single-breadwinner, two-parent family is not in an inferior tax position in comparison to a couple enjoying two full-time incomes The special tax privileges enjoyed by dual-income families should be extended to single-income two-parent families. The Treasury will of course protest that the government cannot afford this level of largesse. In this event, the government should in fairness scale back the tax privileges currently enjoyed by dual-income families in order to give greater tax relief to needier couples trying to raise a family on one income.

2) A family’s level of tax-free threshold and tax relief should always reflect the number of dependants (such as an unwaged at-home spouse and children) being supported on a given income.

3) Government assistance for institutionalised child-care — whether by tax rebates or direct subsidy — should be matched dollar for dollar by identical financial assistance for parents who choose to raise their children at home.

4) The government should adopt a more transparent means of delivering assistance to families. Instead of two types of payments for two types of child-care being administered by two different ministries, there should be only one type of payment (or tax rebate), which should be given directly to families. This payment should reflect the number and ages of the dependent children and should not favour children enrolled in day-care centres over children raised at home.

About the author 

John Ballantyne is a Melbourne-based historian and journalist. This article is reprinted from the Endeavour Forum Newsletter (September 2024).